Notes to Condensed Financial
Statements
March 31, 2016
(Unaudited)
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization
SigmaBroadband Co. ("Sigma" or the "Company")
was incorporated in Georgia in October 2012. The Company has been
in the development stage since inception and has not generated any
revenue to date. The Company will be a full service,
facilities-based broadband service provider, local exchange and
inter-exchange carrier serving residential and commercial customers
with a special focus on rural areas.
Basis of
Presentation
The accompanying unaudited financial
statements have been prepared in accordance with U.S. generally
accepted accounting principles for interim financial information.
Certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with U.S.
generally accepted accounting principles have been condensed or
omitted pursuant to such principles and regulations of the
Securities and Exchange Commission for Form 10-Q. All adjustments,
consisting of normal recurring adjustments, have been made which,
in the opinion of management, are necessary for a fair presentation
of the results of interim periods. The results of operations for
such interim periods are not necessarily indicative of the results
that may be expected for a full year because of, among other
things, seasonality factors in the retail business. The unaudited
financial statements contained herein should be read in conjunction
with the audited financial statements and notes thereto for the
fiscal year ended December 31, 2015.
Long-Lived
Assets
The Company reviews its long-lived assets for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. An
impairment loss is recognized when estimated future cash flows
expected to result from the use of the asset and its eventual
disposition are less than its carrying amount. Based on this
analysis an impairment loss of $8,000,000 was recognized at
December 31, 2015.
Revenue
Recognition
In general, the Company will record revenue
when persuasive evidence of an arrangement exists, services have
been rendered or product delivery has occurred, the sales price to
the customer is fixed or determinable, and collectability is
reasonably assured. The following policies reflect specific
criteria for the various revenues streams of the
Company:
Revenue will be recognized at the time the
product is delivered or services are performed. Provision for sales
returns will be estimated based on the Company's historical return
experience. Revenue will be presented net of returns.
Use of
Estimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
Segment
Information
The Company follows Accounting Standards
Codification ("ASC") 280, "Segment Reporting". The Company
currently operates in a single segment and will evaluate additional
segment disclosure requirements as it expands its
operations.
Net Loss
Per Common Share
Basic net (loss) income per common share is
calculated using the weighted average common shares outstanding
during each reporting period. Diluted net (loss) income per common
share adjusts the weighted average common shares for the potential
dilution that could occur if common stock equivalents (convertible
debt and preferred stock, warrants, stock options and restricted
stock shares and units) were exercised or converted into common
stock. There were no common stock equivalents at March 31, 2015 or
2016.
SigmaBroadband Co.
Notes to Condensed Financial
Statements
March 31, 2016
(Unaudited)
Income
Taxes
Deferred income taxes are recognized for the
tax consequences related to temporary differences between the
carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes at each year end,
based on enacted tax laws and statutory tax rates applicable to the
periods in which the differences are expected to affect taxable
income. A valuation allowance is recognized when, based on the
weight of all available evidence, it is considered more likely than
not that all, or some portion, of the deferred tax assets will not
be realized. Income tax expense is the sum of current income tax
plus the change in deferred tax assets and
liabilities.
ASC 740, Income Taxes, requires a company to
first determine whether it is more likely than not (which is
defined as a likelihood of more than fifty percent) that a tax
position will be sustained based on its technical merits as of the
reporting date, assuming that taxing authorities will examine the
position and have full knowledge of all relevant information. A tax
position that meets this more likely than not threshold is then
measured and recognized at the largest amount of benefit that is
greater than fifty percent likely to be realized upon effective
settlement with a taxing authority.
Stock-Based Compensation
The Company accounts for equity instruments
issued to employees in accordance with ASC 718, Compensation -
Stock Compensation. ASC 718 requires all share-based compensation
payments to be recognized in the financial statements based on the
fair value using an option pricing model. ASC 718 requires
forfeitures to be estimated at the time of grant and revised in
subsequent periods if actual forfeitures differ from initial
estimates.
Equity instruments granted to non-employees
are accounted for in accordance with ASC 505, Equity. The final
measurement date for the fair value of equity instruments with
performance criteria is the date that each performance commitment
for such equity instrument is satisfied or there is a significant
disincentive for non-performance.
Cash and
Cash Equivalents
The Company considers all highly liquid
investments with an original maturity of three months or less to be
cash equivalents.
Fair Value
of Financial Instruments
Pursuant to ASC No. 820. "Fair Value
Measurement and Disclosures," the Company is required to estimate
the fair value of all financial instruments included on its balance
sheet as of March 31, 2016. The Company's financial instruments
consist of cash, accounts payable and accrued expenses, loans
payable - stockholders, and note payable . The Company considers
the carrying value of such amounts in the financial statements to
approximate their fair value due to the short-term nature of these
financial instruments.
Reclassifications
Certain prior year
amounts have been reclassified to conform with the current year
presentation.
Recent
Pronouncements
In May 2014, FASB and IASB issued a new joint
revenue recognition standard that supersedes nearly all GAAP
guidance on revenue recognition. The core principle of the standard
is that revenue recognition should depict the transfer of goods and
services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those
goods and services. The new standard is effective for the Company
for the fiscal year beginning January 1, 2017, and the effects of
the standard on the Company’s financial statements are not
known at this time.
SigmaBroadband Co.
Notes to Condensed Financial
Statements
March 31, 2016
(Unaudited)
In March 2016, the FASB issued ASU 2016-03.
The amendments in this Update make the guidance in Updates 2014-02,
2014-03, 2014-07, and 2014-18 effective immediately by removing
their effective dates. The amendments also include transition
provisions that provide that private companies are able to forgo a
preferability assessment the first time they elect the accounting
alternatives within the scope of this Update. The Company is in the
process of evaluating the impact of the adoption of this
ASU.
In March 2016, the FASB issued ASU 2016-09,
Stock Compensation, which is intended to simplify several aspects
of the accounting for share-based payment award transactions. The
guidance will be effective for the fiscal year beginning after
December 15, 2016, including interim periods within that year. The
Company is in the process of evaluating the impact of the adoption
of this ASU.
In April 2016, the FASB issued ASU 2016-10,
Revenue from Contracts with Customer, the principle of which is
that a company should recognize revenue to record the transfer of
promised goods or services to customers in an amount that reflects
the consideration to which the company expects to be entitled for
the transfer of those goods or services by applying the following
steps:
1. Identify the contract(s) with a
customer.
2. Identify the performance obligations in
the contract(s).
3. Determine the transaction
price.
4. Allocate the transaction price to the
performance obligations in the contract.
5. Recognize revenue when, or as, the company
satisfies a performance obligation
The guidance will be effective for the fiscal
year beginning after December 15, 2016, including interim periods
within that year. The Company is in the process of evaluating the
impact of the adoption of this ASU.
NOTE 2 – EQUIPMENT, NET
The Company's furniture and equipment at
March 31, 2016 and December 31, 2015 consisted of the
following:
Telecommunications equipment
|
|
$
|
10,000,000
|
|
|
$
|
10,000,000
|
|
Less: accumulated depreciation
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|
|
2,000,000
|
|
|
|
2,000,000
|
|
Less: impairment
|
|
|
8,000,000
|
|
|
|
8,000,000
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|
|
|
|
|
|
|
|
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Total
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|
$
|
—
|
|
|
$
|
—
|
|
Note 3. LOANS PAYABLE -
STOCKHOLDERS
At March 31, 2016 and December 31, 2015, a
stockholder and officer of the Company was owed $18,025 and $4,438
by the Company for funds he had advanced to pay for certain
expenses. The loan bears no interest and is payable on
demand.
At March 31, 2016 and December 31, 2015, a
stockholder and officer of the Company was owed $11,759 and $4,505
by the Company for funds he had advanced to pay for certain
expenses. The loan bears no interest and is payable on
demand.Note
SigmaBroadband Co.
Notes to Condensed Financial
Statements
March 31, 2016
(Unaudited)
4. NOTE PAYABLE
In December 2013, the Company signed an
agreement to purchase certain telecommunications equipment for $10
million. The agreement called for the Company to sign an
installment agreement for $1,000,0000. The installment agreement,
as amended in November 2015, calls for this balance to be amortized
over a six year term with interest accruing at 8% per annum.
Additionally, under the terms of this modification, payments will
begin 48 months after the signing of the original agreement
(December 2013) at which time all interest accrued until that time
will be due and payable. Interest only payments will begin in month
49 and will continue through month 72 at which time a balloon
payment of the principal and any unpaid interest will be due. At
March 31, 2016 and December 31, 2015, accrued interest on this note
totaled $224,187 and $204,187, respectively.
The amendment stipulates that the remaining
$9,000,000 owed by the Company will be paid by the issuance of
10,000,000 shares of the Company's preferred stock within 36 months
from the date of the amendment. The Company has not issued any
shares at March 31, 2016, under the terms of this
amendment.
Note 5. STOCKHOLDERS' EQUITY
The Company has authorized 500,000,000 shares
of common stock with a par value of $0.0001 per share. During the
three months ended March 31, 2016, the Company issued 100,000
shares at $0.50 per share for services provided to the company. At
March 31, 2016, 24,674,000 shares of common stock were issued and
outstanding.
In August 2014, the Company received $20,000
in payment for 20,000 shares of common stock at $1.00 per share
that are to be issued at a future date.
In March 2016, the Company authorized the
issuance of 50,000 shares of common stock at $0.10 per share, or
$5,000, for services provided to the Company. The shares were
issued in May 2016. (Note 9)
The Company has authorized 10,000,000 shares
of preferred stock with no par value. No shares were issued or
outstanding at March 31, 2016.
Note 6. COMMITMENTS AND
CONTINGENCIES
The Company currently leases its offices on a
month to month basis from the Company's President and stockholder
for $500 per month.
Rent expense for the three months ended March
31, 2016 and 2015, totaled $1,500 and $1,500, respectively, and was
capitalized as additional paid-in capital.
Note 7. INCOME TAXES
The deferred tax asset consists of the
following:March 31, 2016 December 31, 2015
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|
March 31, 2016
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|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
1,710,000
|
|
|
$
|
1,676,000
|
|
Valuation allowance
|
|
|
(1,710,000
|
)
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|
|
(1,676,000
|
)
|
Deferred tax asset, net
|
|
$
|
—
|
|
|
$
|
—
|
|
SigmaBroadband Co.
Notes to Condensed Financial
Statements
March 31, 2016
(Unaudited)
The income tax benefit differs from the
amount computed by applying the statutory federal and state income
tax rates to the loss before income before income taxes. The
sources and tax effects of the differences are as
follows:
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|
March 31, 2016
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|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
Statutory federal income tax rate
|
|
|
34
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%
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|
|
34
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%
|
State income taxes, net of federal
taxes
|
|
|
6
|
%
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|
|
6
|
%
|
Valuation allowance
|
|
|
(40
|
)%
|
|
|
(40
|
)%
|
Effective income tax rate
|
|
|
0
|
%
|
|
|
0
|
%
|
As of March 31, 2016, the Company has a net
operating loss carryforward of approximately $10,366,000. This loss
will be available to offset future taxable income. If not used,
this carryforward will begin to expire in 2033. The deferred tax
asset relating to the operating loss carryforward has been fully
reserved at March 31, 2016.
The Company currently has no federal or state
tax examinations in progress, nor has it had any federal or state
examinations since its inception. All of the Company's tax years
are subject to federal and state tax examinations. The Company is
only subject to state taxes in Georgia.
Note 8. BASIS OF REPORTING
The Company's financial statements are
presented on a going concern basis, which contemplates the
realization of assets and satisfaction of liabilities in the normal
course of business.
The Company has incurred losses from
inception of approximately $10,366,000, which among other factors,
raises substantial doubt about the Company's ability to continue as
a going concern. The ability of the Company to continue as a going
concern is dependent upon management's plans to raise additional
capital from the sales of stock and receiving additional loans from
related parties.
The financial statements do not include any
adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and
classification of liabilities that may result from the possible
inability of the Company to continue as a going
concern.
Note 9. SUBSEQUENT EVENTS
In May 2016, the Company issued the 50,000
shares of common stock that were authorized in March 2016 for
services provided to the Company. (Note 5)